While the costs of producing electricity are expected to rise - consumers are willing to pay higher rates if those costs mitigate global warming, reveales recent concurrent surveys of residential electricity consumers and state public utility regulators.

The consumer survey was conducted by ICR for Deloitte, and the regulator survey was conducted by Deloitte."The questions posed to each group were different but had common themes, and we believe that the surveys make for interesting reading when viewed individually and together," said Branko Terzic, Energy & Resources regulatory policy leader for Deloitte.

According to the survey of 50 top state public utility regulators, a great majority (87 percent) of respondents anticipate that the cost of electricity production is likely to increase next year. The regulators cited the following factors as contributing most heavily to the cost increases:

According to the survey of 50 top state public utility regulators, a great majority (87 percent) of respondents anticipate that the cost of electricity production is likely to increase next year. The regulators cited the following factors as contributing most heavily to the cost increases:

• Fuel prices (35 percent)
• Environmental compliance (23 percent)
• Capital costs (21 percent)
• Inflation (11 percent)

Despite the prospect of rising electricity prices, the majority of America's consumers represented by the survey sample are willing to pay higher electric rates if it reduces global warming:

• Sixty-two percent of consumers would be willing to pay five percent more on their electric bills to stop greenhouse gas emissions. 
• When asked about specific technologies, 55 percent of consumers said they would pay five percent more to support "clean coal" technology.

Deloitte's consumer survey, which was based on national telephone interviews with 1,000 adults, also reveals that consumers want government policymakers to enforce more stringent environmental regulations:

• An overwhelming 82 percent of consumers responded that it was important for regulators to impose laws reducing greenhouse gas emissions (although 45 percent did not know whether their state had passed such laws or regulations).

The state regulators who responded to Deloitte's survey also appear to be concerned about global warming:

• Eighty-three percent reported that they are "somewhat" or "very" concerned with greenhouse gas emissions.
• Seventy percent indicated it was important to mandate the reduction of greenhouse gas emissions through state regulation.

When asked to rank their preferences for various technologies that can reduce greenhouse gas emissions, these regulators indicated that:

• Nuclear power ranked first as the preferred technology
• Energy efficiency technologies ranked second
• Renewable energy technologies ranked third
• Clean coal technologies ranked last

The survey further explored the issue of renewable energy support by asking regulators who should receive incentives for renewables:

• Thirty-nine percent felt that providing incentives to power generators was the most effective use of incentives.
• Twenty-nine percent preferred providing incentives to consumers.
• Twenty-five percent preferred providing incentives to distribution companies.

The survey also asked state regulators to identify the most significant barriers to increasing renewable energy resources in their states. Responses were mixed and distributed:

• Twenty-six percent cited transmission constraints.
• Twenty-three percent cited high prices to consumers.
• Eighteen percent cited immature technology.
• Seventeen percent cited a lack of adequate incentives.
• Seven percent cited the current competitive market structure.

While commissioners were divided on the key barriers to renewable energy, fully 69 percent responded that their consumers would support an increase in rates (ranging from five percent to more than 15 percent per year) to mitigate greenhouse gas emissions. Similarly, the regulators were cost-sensitive to their jurisdictional utilities purchasing electricity from a source with carbon capture and sequestration:  

• Seventy-six percent said the utility should do so even if the increase in costs is five percent.
• Fifty-eight percent supported such purchases with a 10 percent increase in costs.
• Thirty-eight percent supported such purchases with a 15 percent increase. 

"Our survey of regulators reveals agreement on several key matters and lack of agreement on others," said Greg Aliff, vice chairman and U.S. Energy & Resources leader, Deloitte LLP. "For example, regulators differ on how to best incentivize renewable energy, but agree on matters like consumer acceptance of some level of rate increases that support greenhouse gas reductions."

Aliff goes on to say that when it comes to consumers, Deloitte's surveys "show a desire for more efficient energy and a willingness to pay some amount for it. The real question is just how much these technology advances will actually cost, and how much consumers are going to willingly accept."